People can do a lot online these days. They can purchase nearly anything, from cars to European vacations to high-definition television and financial products. They can accomplish nearly any financial transaction, from opening an investment account to applying for a mortgage to depositing funds into an IRA.
People can do all of this online. That does not mean that they will.
Commodity vs. consultative purchases
There are two categories of goods and services: commodity and consultative. Commodity goods are those that are easy for consumers to purchase, such as books, DVDs and airline tickets. A person buying a book at Amazon.com will rarely ask many questions or require help with the purchase; he might quickly compare prices between different online stores, but ultimately he decides and buys it—online and unassisted.
Consultative goods and services are different; they are typically major purchases that compel consumers to research and compare several options. Cars, houses, insurance, luxury goods, banking and investment accounts all fall in this category. By their nature, consultative goods involve salespeople assisting the consumer in making the decision to purchase. The purchasing pattern is different from commodity goods in that there is an extra step: gathering information and consulting with a salesperson or other resource. The mere fact that consumers are buying online does not eliminate the need for consultative interactions.
Build it and they will come
The advent of the Internet changed the way consumers conduct business in several ways. Beyond just providing them with an additional medium in which to purchase goods, conduct financial transactions and apply for services, the Internet has given consumers unprecedented access to information and research on consultative goods and services. This is completely different and unique to the Internet experience. Before the Internet came along, customers did not have such an avenue to research their purchases without literally visiting five or six brick-and-mortar stores before taking the plunge. The Internet gives consumers the ability to do exactly that when shopping for a consultative item such as a loan or car.
Companies selling commodity goods figured out how to make their online channel successful. Pioneers in the e-commerce space, like Amazon.com, became successful because they realized that the Internet lends itself quite well to self-service transactions with commodity purchases. The purchasing pattern for the consumer is essentially the same as it is in a physical store: Find the item, read the price, make a decision and make the purchase.
However, companies that sell consultative goods and services have not yet figured out how to make their online channel as profitable as it should be. They figured that if they built a web site, the consumers would come. And they are coming. But they are researching; they aren’t transacting. Because the Internet gives consumers an excellent vehicle for research, companies selling consultative goods and services usually see a huge amount of traffic on their web sites. But typically a very, very small amount of that traffic actually converts into business online.
There are three unique attributes of online consumers that make them different from consumers transacting in other channels:
- They are all buyers.
All of the visitors on a company’s Web site are there for a reason: They chose to be. Unlike those consumers prompted by print, radio, television and direct mail, every single visitor on an insurance company’s web site is really looking to buy insurance. Why else would they be there? - They are either coming from a competitor’s site or headed to it.
If very few consumers actually buy consultative products online, what are all those visitors doing? They are doing their primary research to select the right product or find the best price. This means going to competitive sites and doing comparisons. - The magic moment is now.
The Internet presents a “magic moment” when consumers are actually interested in hearing more about the product they are researching. They are not cooking dinner, talking to their kids or watching TV. The moment they visit a site offering consultative goods, they are announcing their interest.
Given these factors and the huge amount of online traffic such consultative product companies see, the online channel should be their most lucrative channel. But it is not. Far from it, actually. Online conversion rates are abysmal when compared to other channels, such as direct mail or print advertising. Why? Because companies don’t go the last mile and replace the piece of the purchasing pattern that is missing: the consultation from a skilled salesperson.
Just because consumers can buy consultative goods online does not mean they are willing to change the consultative process, which has been employed to sell these products and services over the past 100 years. This step needs to be added back to the sales process for companies to reap the huge revenue opportunities of their online channels.
Full-service self-service
As it exists today, the web is like a store with all the salespeople out to lunch. With no one available to help, the Internet does not encourage consumers to purchase consultative goods and services. Rather, it is the forum for research. Consumers then typically make the actual purchase through a channel where consultation is available, such as the telephone. Self-service web sites offering consultative goods must address this limitation; without a salesperson present, the consumer is missing the chance to gather information and ask questions in real time, which severely hinders the purchasing process. Companies must embrace technology that is available to facilitate live, online, real-time assistance to help consumers complete transactions.
Web analytics combined with real-time date mining capabilities allows companies to monitor web visitor behavior and proactively approach those most likely to transact with an offer of live online assistance provides invaluable results to companies with consultative goods and services. Companies should not fear that this technology is difficult to implement or that it requires extensive training and maintenance. In reality, it is easy to implement and maintain because it is offered on a pure “ASP” basis with set up, launch, and go-live available to most companies in just a couple of days. With entry-level costs as low as $2,500 per month, this technology generates a fast and substantial ROI for most companies within the first couple of months. Most importantly, consumers appreciate the online assistance and feel more comfortable moving forward with transactions, which, in turn, generates top-line revenue growth for companies. At the end of the day, some things will never be bought online; they must be sold.
